Dover Q3 Earnings Beat, Revenues Miss Ests - Analyst Blog


Dover Corporation ( DOV ) reported third-quarter 2013 adjusted earnings from continuing operations of $1.54 per share, beating the Zacks Consensus Estimate of $1.50 and up 23% from the prior-year quarter's earnings of $1.25 per share. Organic growth across all segments, strength in drilling and downstream markets within Energy, refrigeration & food equipment markets, and Printing & Identification, and cost reduction activities helped the year-over-year increase.

On a reported basis, earnings from continuing operations were $1.53 per share, up 20% from $1.27 per share earned in the prior-year quarter. Earnings in the reported quarter included tax benefit of 3 cents per share, one-time gains of 2 cents and a charge of 6 cents per share related to the Knowles spin off. The year-ago quarter included gains from discrete
and other tax items of 2 cents per share.

Revenues and Margins

Total revenue rose 7% year on year to $2.25 billion in the quarter, but fell short of the Zacks Consensus Estimate of $2.3 billion. The year-over-year rise includes an organic growth of 3% and a 4% contribution from acquisitions.

Cost of sales increased 7% to $1.37 billion in the quarter from $1.29 billion in the year-ago quarter. Gross profit went up 8% year over year to $877 million. Consequently, gross margin expanded 30 basis points (bps) to 38.9% in the quarter.

Selling, general and administrative expenses increased 7% year over year to $482 million. Operating profit in the reported quarter increased 10% to $394 million. Operating margin also expanded 40 bps to 17.5% in the quarter.

Segmental Performance

Revenues in the Communication Technologies segment rose 4% year over year to $413.6 million in the reported quarter. The segment's income increased 19% year over year to $76 million.

Energy revenues went up 3% to $577 million in the quarter. The segment's operating income went up 5% to $145.5 million from $139 million in the prior-year quarter.

Revenues in the Engineered Systems segment increased 13% to $1,005 million in the quarter. The segment's income also improved 19% to $172 million.

Printing & Identification segment revenues were $256 million in the quarter compared with $247 million in the prior-year quarter. The segment reported an operating income of $42.9 million, increasing 9% from $39.5 million a year ago.

Bookings and Backlog

The company ended the third quarter of 2013 with bookings worth $2.16 billion versus $1.98 billion at the end of the third quarter of 2012. Backlog increased year over year to $1.54 billion at the end of the reported quarter compared with $1.51 million in the year-ago quarter.

Cash Flows

The company generated cash flow from operating activities of $340 million in the reported quarter, up from $286 million in the prior-year quarter. Free cash flow was $283 million compared with $218 million in the prior-year quarter.

Outlook for 2013

Due to weaker-than-expected market conditions, Dover tweaked its earnings guidance to a range of $5.57-$5.64 per share from the prior earnings expectation of $5.56-$5.71 per share. Dover now expects revenue growth of 7% compared with its previous projection of  7%-9% growth. The new guidance assumes an organic revenue improvement of 3% and a 4% contribution from acquisitions.

Our View

Dover will continue to benefit from its acquisitions, growth in bookings and orders, and a positive outlook for the semiconductor market. However, volatile raw material costs will put margins under pressure and the printing & identification segment results are likely to be affected given its above-average exposure to Europe.

Dover currently retains a short-term Zacks Rank #2 (Buy). Along with Dover, Manitex International, Inc. ( MNTX ), Colfax Corporation ( CFX ) and Ingersoll-Rand Plc ( IR ) also belong to the diversified machinery industry. While Manitex carries a Zacks Rank #1 (Strong Buy), Colfax and Ingersoll retain a Zacks Rank # 2 (Buy).

COLFAX CORP (CFX): Free Stock Analysis Report

DOVER CORP (DOV): Free Stock Analysis Report

INGERSOLL RAND (IR): Free Stock Analysis Report

MANITEX INT INC (MNTX): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: CFX , DOV , IR , MNTX

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